Saturday, March 9, 2019

EU's Terror Funding Risk List, Which Includes Pak, Could Kick In Next Month

EU's Terror Funding Risk List, Which Includes Pak, Could Kick In Next Month

The EU's decision to list Pakistan – among other things – relied on Islamabad's lack of effective financial strictures against UN-designated terrorists like Hafiz Saeed

The list is awaiting approval from EU Parliament and Council. After the green light, it will come into force 20 days after its publication in the official journal.

New Delhi: Just a day before the February 14 Pulwama attack, the EU had listed Pakistan among “High-risk third countries” for money laundering and terror funding. The EU’s decision – among other things – relied on Islamabad’s lack of effective financial strictures against UN-designated terrorists like Hafiz Saeed.

The list must now be approved by the European Parliament and Council before March 13, which means that EU’s catalogue of ‘high-risk’ countries – that includes Pakistan – could come into force as early as next month.

The list of high-risk countries was unveiled as a ‘delegated act’ on February 13. It was the first such after a new stricter criteria came into force based on the fifth anti-money laundering directive in July 2018 – and also the first time that Pakistan was part of the list.

Pakistan has not been included in previous lists, which have been in place and amended twice since 2016.

According to EU law, the delegated regulation will have to be submitted within a month for approval from European Parliament and Council. After the green light, it will come into force 20 days after its publication in the official journal.

According to a fact sheet on the regulation, the objective of the listing is to protect the EU financial system from risks of money laundering and terrorist financing coming from third countries. “As set in the new Anti-Money Laundering Directive, banks and other gatekeepers will have to be more vigilant and carry out extra checks when carrying out transactions involving high-risk third countries identified by the Commission,” it stated.

As per the delegated regulation’s explanatory memorandum, the listing of Pakistan and 22 other countries took note of the work of the international money-laundering watchdog, Financial Action Task Force (FATF) and especially their plenary meeting in October 2018.

However, the amended directive in July 2018 had asked the European Commission to go “beyond FATF criteria” while assessing high-risk countries.

Pakistan’s inclusion in the ‘grey list’ by FATF in June 2018 and the subsequent ‘action plan’ drawn by Islamabad was the basis for reviewing the South Asian country, said the official EU note.

Following the review, the Commission listed out ten areas of “strategic deficiencies” for Pakistan.

It specifically pointed out that Pakistan was not implementing financial structures against UN-designated terrorists to prevent them from raising money and funding their activities.

“(8) lack of effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services”

The EU document also cites a lack of enforcement by Pakistan against targeted financial sanctions and shortcomings in ensuring that designated persons are unable to use resources from facilities and services that they own.

The language used by the EU is similar to that of FATF’s list of steps that Pakistan has to undertake to strengthen its AML/CTF regime after the plenary meeting in June 2018.

In the latest plenary of February 22, Pakistan avoided the blacklist till the next plenary in June 2018. However, the FATF clearly said that there was “limited progress on action plan items due in January 2019” and asked Islamabad to “swiftly complete its action plan, particularly those with timelines of May 2019”.

It is, therefore, highly likely that the EU’s listing of Pakistan among ‘high-risk countries’ could take place before FATF taking any further decision.

Unusually, the FATF outcome document on the compliance of problematic countries released on February 19 specifically mentioned eight terror organisations against whom Pakistan had not taken action. It included the Jamaat-ud-Dawa (JuD) and its charity wing, as well as the Jaish-e-Mohammed (JeM).

“Pakistan has revised its TF risk assessment; however, it does not demonstrate a proper understanding of the TF risks posed by Da’esh, AQ, JuD, FiF, LeT, JeM, HQN, and persons affiliated with the Taliban”

Pressuring Pakistan on terror funding through multilateral organisations – with the help of friendly countries – has been one of New Delhi’s key strategies to plug cross-border terrorism.

Pakistan had also previously been in FATF spotlight about ten years ago. However, it emerged from FATF’s monitoring process in 2015 after showing “significant progress” in addressing the issue of terrorist financing.

After the easing of tensions with India following the Pulwama attack and the airstrikes, Pakistan had announced that it will take action against proscribed organisations.

Both JuD and Falah-e-Insaniat Foundation were finally put in the list of banned organisations by Pakistan’s National Counter Terrorism Authority on March 5.

The Pakistan government had announced on Wednesday that it had started a “nationwide crackdown” against proscribed groups. On Thursday, Sindh government claimed that it has “taken control” of 56 facilities run by JuD and FiF.

Pakistani leaders have repeatedly said that the action was not being taken under pressure from India, but due to the compliance of FATF guidelines.

Earlier this week, Pakistan finance secretary Arif Ahmed Khan informed a parliamentary panel that non-implementation of FATF recommendations could lead to “economic sanctions.